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Report from the National 8(a) Association 2016 Winter Conference in Orlando

There was record attendance at the National 8(a) Association 2016 Winter Conference, which provided updates on pending rules from the Small Business Administration (SBA) both in terms of substance and timing of release.

As an integral part of the conference, Holland & Knight made a comprehensive presentation on how to successfully manage multiple subsidiary government contracting organizations.

The National 8(a) Association 2016 Winter Conference, held in Orlando on Feb. 9-10, provided several useful updates on Small Business Administration (SBA) matters affecting Indian tribes, Alaska Native Corporations (ANCs), Native Hawaiian Organizations (NHOs) and their government contracting operations. The conference had record attendance with more than 500 attendees receiving an array of useful updates and education on issues impacting their administration of SBA's 8(a) program and government contracting. Tribes, ANCs and NHOs were all well represented at the conference.

Update on SBA Rule Makings

SBA's Associate General Counsel for Procurement Law John Klein told attendees that the two pending SBA rule makings (the Limitation on Subcontracting/Similarly Situated Entities (SSE) and Mentor-Protégé changes, including ANC and tribal affiliation rule changes) are in "final approval" at SBA. Once SBA approves them, they will go to the Office of Management and Budget (OMB) for approval and interagency review, which typically takes an additional 90 days. Klein reports that the Limitation on Subcontracting rule will likely be finalized before the Mentor Protégé rule.

Therefore, it would appear that June would be the likely release date, which would hopefully be in time for the National 8(a) Association 2016 Summer Conference in Anchorage. Note, however, that the Limitation on Subcontracting rule implementation will also require a change to the Federal Acquisition Regulations (FAR), which means another rule-making process will be required. That process has not yet begun. As a result, implementation could be substantially further off.

Here are a few other highlights of what those final rules are likely to contain:

Limitation on Subcontracting

For mixed contracts (supplies and services), the final rule likely will state that the Limitation on Subcontracting requirements will apply to either the services or supply component of the contract, but not both, and the "primary purpose" of the contract will dictate the characterization of the contract (supply or service). This is consistent with recent statutory language and overturns a U.S. Court of Federal Claims case that suggested a set-aside contractor would have to meet the Limitation on Subcontracting on all components of the contract.

SBA will clarify that when a set-aside contract calls for multiple products and Non-Manufacturer Rule (NMR) waivers are available for some of those products, then the percentage of work requirements will be met if the small business prime contractor provides 50 percent or more of the contract price through products made by small businesses and NMR waiver-covered items.

SBA is likely going to explicitly note that "software" is a product.

SBA will allow Similarly Situated Entity subcontractors to be counted only at the first tier of subcontracting and will allow only the percentage of work the first tier subcontract performs to be counted (not work it subcontracts to a lower tier).

The North American Industry Classification System (NAICS) code and size standard that applies to a SSE subcontractor may be the one that best describes the subcontractor's work and may be different from the NAICS code that applies to the prime contract.

Mentor-Protégé

As expected, SBA will have two different mentor-protégé programs: the existing 8(a) program and a parallel program for all other types of small business. Both programs will be administered by the SBA Office of Business Development.

SBA reportedly will not allow 8(a) joint ventures to be "populated."

There are important aspects of the proposed rule applicable to ANC and tribal affiliation regarding "common administrative services," "contract administration services" and business development, which are, in essence, effective now because they reflect SBA's recent guidance on these subjects. These definitions should be taken into account now.

Managing Multiple Subsidiary Operations in the Government Contracting Arena

As part of the conference, Holland & Knight attorneys Walter Featherly, Bob Tompkins and Sarah Curtis made a comprehensive presentation on the Legal and Practical Considerations in Managing Multiple Subsidiary Operations in the Government Contracting Arena. This presentation is of particular interest to entities with multiple subsidiaries, one or more of which may be participants in the 8(a) program, due to the intricate rules that apply to such situations. Management of multiple subsidiaries requires a dedication to achieving the delicate balance between rule compliance and business objectives.

Presentation Highlights

Review of statutory eligibility of tribes and ANCs as minority and economically disadvantaged business enterprises. While tribes and ANCs share most eligibility requirements, there are some important distinctions, such as a presumption that ANCs are both socially and economically disadvantaged, whereas tribes must prove, at least initially, that they are economically disadvantaged.

SBA 8(a) rules applicable to tribes and ANCs that own and manage multiple subsidiary companies, including subsidiary companies that are certified in the 8(a) program or otherwise are small businesses. For example, each subsidiary must be small as determined by its primary NAICS code, and affiliation exceptions for tribes and ANCs differ between 8(a) and general small business set-asides.

Bid, proposal and protest considerations. Offerors must have sufficient experience, resources and past performance without being unduly reliant on its partners, including parent or sister companies, while being mindful of the ostensible contractor rule.

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